Discontinued Operations

Cincinnati Bell Wireless LLC ("CBW"), our former Wireless segment, provided digital wireless voice and data communications services to customers in the Company’s licensed service territory, which included Greater Cincinnati and Dayton, Ohio, and areas of northern Kentucky and southeastern Indiana. The Company’s customers were also able to place and receive wireless calls nationally and internationally due to roaming agreements the Company had with other carriers.

In the second quarter of 2014, we entered into agreements to sell our wireless spectrum licenses and certain other assets related to our wireless business, including leases to certain wireless towers and related equipment and other assets. The agreement to sell our spectrum licenses closed on September 30, 2014 for cash proceeds of $194.4 million. Prior to this date, the Company's digital wireless network utilized 50 MHz of licensed spectrum in the Cincinnati area and 40 MHz of licensed spectrum in the Dayton area, which had a carrying value of $88.2 million. Simultaneous with the close of the spectrum sale, the Company entered into a separate agreement to use certain wireless spectrum for $8.00 until we no longer provided wireless services. We ceased providing wireless service effective March 31, 2015. The fair value of the lease, which is considered a Level 3 measurement based on other comparable transactions, totaled $6.4 million and was recorded as a prepaid expense and amortized over a six month period ending March 31, 2015.

As of March 31, 2015, there were no subscribers remaining on the network and we no longer required the use of the spectrum being leased. Therefore, the $112.6 million gain on the sale of the wireless spectrum licenses, which had been previously deferred, was recognized in Income (loss) from discontinued operations, net of tax during the three months ended March 31, 2015. On April 1, 2015, we transferred certain other wireless assets to the acquirer, including leases to certain wireless towers and related equipment and other assets, which resulted in a gain of $15.9 million in the second quarter of 2015. As a result, we removed the following assets and liabilities in the second quarter of 2015.



(dollars in millions)	As of April 1, 2015
Property, plant and equipment, net	$	16.0

Current portion of long-term debt	0.5
Long-term debt, less current portion	24.8
Other non-current liabilities	6.6
Total liabilities	$	31.9

Wireless financial results for the twelve months ended December 31, 2015, 2014 and 2013 reported as Income (loss) from discontinued operations, net of tax on the Consolidated Statements of Operations are as follows:



	Twelve Months Ended
	December 31,
(dollars in millions)	2015			2014			2013
Revenue	$	4.4		$	132.8		$	201.5
Costs and expenses
Cost of products and services	12.0			66.9			102.3
Selling, general and administrative	2.2			19.5			33.6
Depreciation and amortization expense	28.6			103.4			41.2
Restructuring charges	3.3			16.3			0.2
Impairment of asset	—			7.5			—
Transaction costs	—			3.2			—
(Gain) loss on sale or disposal of assets	(0.4		)	—			3.5
Amortization of deferred gain	(6.5		)	(22.9		)	(3.3		)
Total operating costs and expenses	39.2			193.9			177.5
Operating income (loss)	(34.8		)	(61.1		)	24.0
Interest (income) expense	(1.7		)	2.8			6.0
Other (income) expense	(2.3		)	2.2			2.0
Gain on transfer of tower lease obligations and other assets	15.9			—			—
Gain on sale of wireless spectrum licenses	112.6			—			—
Income (loss) before income taxes	97.7			(66.1		)	16.0
Income tax expense (benefit)	34.8			(24.0		)	5.8
Net income (loss) from discontinued operations	$	62.9		$	(42.1	)	$	10.2

Wireless assets and liabilities presented as discontinued operations as of December 31, 2015 and December 31, 2014 are as follows:



(dollars in millions)	December 31, 2015		December 31, 2014
Current assets
Prepaid rent - spectrum license	$	—	$	3.2
Other current assets	—		1.5
Total current assets from discontinued operations	—		4.7
Property, plant and equipment	—		44.1
Other noncurrent assets	—		0.5
Total noncurrent assets from discontinued operations	—		44.6
Total assets from discontinued operations	$	—	$	49.3

Current liabilities
Current portion of long-term debt	$	—	$	1.6
Accounts payable	—		5.0
Restructuring liability	4.7		15.4
Deferred gain on sale of wireless spectrum licenses	—		112.6
Other current liabilities	0.7		7.4
Total current liabilities from discontinued operations	5.4		142.0
Long-term debt, less current portion	—		81.6
Deferred gain on sale of towers	—		13.1
Other noncurrent liabilities	—		8.0
Total noncurrent liabilities from discontinued operations	—		102.7
Total liabilities from discontinued operations	$	5.4	$	244.7

Certain capital lease and retirement obligations were reported as liabilities from discontinued operations as of December 31, 2014 as we continued to operate the wireless business at that time. Subsequent to ceasing operations of our wireless business these liabilities and the related assets were transferred to continuing operations as they were retained by the Company. Amounts transferred at April 1, 2015 include the following:



	Continuing Operations		Discontinued Operations
	As of April 1, 2015		As of December 31, 2014
(dollars in millions)
Current portion of long-term debt	$	1.1	$	1.1
Long-term debt, less current portion	53.4		57.0
Other noncurrent liabilities	10.9		7.5
Total liabilities	$	65.4	$	65.6

In the first quarter of 2013, in connection with our review of the estimated remaining useful lives of property, plant and equipment, we shortened the estimated useful lives assigned to wireless network software to three years. This change resulted from smartphone-driven technology upgrades, enhancements and projected retirements. As a result of this change in estimate, we recorded additional depreciation expense of $8.5 million in the first quarter of 2013.

In conjunction with our long-lived asset analysis conducted in the fourth quarter of 2013, we reassessed the useful lives of all of our Wireless property, plant and equipment. The remaining useful lives for all Wireless property, plant, and equipment assets were reduced to 30 months as of December 31, 2013, resulting in additional depreciation expense of $3.0 million in the quarter.

Following the agreement to sell our wireless spectrum licenses and certain other assets in the second quarter of 2014, we further reduced the remaining useful lives of those assets not included in the sale to be fully depreciated as of March 31, 2015. As a result of the combined changes in estimates, depreciation and amortization expense increased by $62.2 million for the year ended December 31, 2014. In addition, adjusting the useful lives of our Wireless property, plant and equipment also required that we reduce the amortization period of the deferred gain associated with the 2009 tower sale in a similar manner. Amortization of the deferred gain associated with the tower sale totaled $6.5 million, $22.9 million and $3.3 million for the years ended December 31, 2015, 2014 and 2013, respectively.

In 2015, a $0.4 million gain was recorded on the sale of a wireless tower that was fully depreciated. An asset impairment loss of $7.5 million was also recognized in 2014 for the write-off of certain construction-in-progress projects that were not completed due to the wind down of wireless operations. In 2013, a $3.5 million loss on disposal of assets was incurred for equipment that was either disconnected from the wireless network, abandoned or demolished.

Restructuring liabilities were established for employee separations, lease abandonments and contract terminations charges. In 2015, restructuring charges were for tower operating leases that were abandoned. During 2014, restructuring charges included $13.1 million in contract termination charges for wireless contracts that were no longer utilized and $3.2 million in employee separation charges. In 2013, $0.2 million was recorded for lease abandonment charges due to the closure of a retail store.

In the fourth quarter of 2014, we repaid $22.7 million 8 ³/₈% Senior Notes due 2020 using proceeds from the sale of our wireless spectrum licenses.

Following is selected operating, investing and financing cash flow activity from discontinued operations included in Consolidated Statements of Cash Flows:



	Twelve Months Ended
	December 31,
(dollars in millions)	2015			2014			2013
Depreciation and amortization	$	28.6		$	103.4		$	41.2
(Gain) loss on sale of assets	(0.4		)	—			3.5
Impairment of assets	—			7.5			—
Deferred gain on sale of spectrum licenses	(112.6		)	—			—
Amortization of deferred gain on sale of towers	(6.5		)	(22.9		)	(3.3		)
Gain on transfer of tower lease obligations and other assets	(15.9		)	—			—
Non-cash spectrum lease	3.2			3.2			—
Restructuring payments	(14.5		)	(2.4		)	(0.3		)
Capital expenditures	—			(6.5		)	(16.0		)
Proceeds from sale of wireless spectrum licenses	—			194.4			—
Repayment of debt	(0.3		)	(23.5		)	(0.6		)

Operating Lease Commitments

The Company's discontinued operations leased certain facilities and equipment. Operating lease expense was $1.4 million, $6.4 million, and $6.5 million, in 2015, 2014, and 2013, respectively.

At December 31, 2015, future minimum lease payments required under operating leases have been reported as Restructuring liability.